GMR raising $1.5 bn for Nepal hydel project

Kathmandu, April 5 (IANS) Indian infrastructure major GMR is in talks with global lenders to raise $1.5 billion to develop the 900 MW Upper Karnali hydel project in Nepal.

Coordinated by the Investment Board Nepal (IBN), representatives from GMR, the Asian Development Bank (ADB), International Finance Corporation (IFC), International Bank for Reconstruction and Development (IBRD), Commonwealth Development Corporation (CDC), DEG — a subsidiary of German Development Bank, Japan International Cooperation Agency (JICA) and OPEC Fund for International Development (OFID) arrived in Kathmandu and started tripartite talks on Tuesday.

GMR signed the power development agreement in 2015.

Sources familiar with the development told IANS that as financial closure for GMR is going to end by September, it is imperative for the Indian company to raise funds from various lenders to ensure investment.

After raising the necessary fund, a separate company will be set up to develop the project in western Nepal, spread across three districts — Surkhet, Dailekh and Achham.

Another Indian firm, Sutluj Jal Vidhyut Nigam, is also developing another hydroelectric project, Arun III, with the same capacity.

Senior officials of IBN and GMR will give presentations about the Upper Karnali project, and review its progress, including details of the power purchase agreement, existing financial arrangement and progress towards financial closure before making a final commitment for loan.

Sources said chances were high of the project getting commitment from the lenders, who have submitted an expression of interest (EOI), pledging a loan of more than $1 billion for the project.

The project is scheduled to be completed by 2021 at an estimated cost of $1.5 billion.

According to the power development agreement of the project, GMR should complete land acquisition before the financial closure.

According to IBN, an agreement has been reached on the resettlement action plan with local people who will be displaced due to the project. An estimated 239 households will be affected.

A total area of 48.85 hectares of private land and 207.75 hectares of government-owned land will be acquired for the project.

“The land acquisition progress is almost over,” IBN officials said.

The World Bank group-initiated IFC had earlier signed an agreement with GMR to become an equity partner in the project.

As per the agreement, IFC will have a 10 percent stake and will lead the fundraising for the financial closure.

Subsequently, the Nepal government and GMR signed a Project Development Agreement in September 2015.

The project developer will give 27 percent of the shares to the government, while the country will get 12 percent (108 MW) of the total energy produced for free.

The project is expected to provide jobs to more than 2,000 people, and the government is projected to earn NRs.300 billion (Indian Rs.200 billion).